January 7, 2008

 

US Wheat Outlook on Monday: Mixed start amid lack of fresh news

 

 

U.S. wheat futures are poised to open Monday's day session mixed amid a lack of fresh news and with some traders staying on the sidelines amid expectations for index fund selling.

 

In e-cbot overnight trading, Chicago Board of Trade March wheat rose 1 cent to US$9.32 1/2.

 

There have been few new inputs out for wheat since the beginning of the year, and the news front was quiet during the weekend. Outside markets also are subdued and not providing strong direction to the grains, traders said.

 

Traders expect index funds will start rebalancing on Tuesday and that they will be buying corn while selling wheat and soybeans. AgResource Company on Friday estimated index funds have to sell more than 40,000 contracts of soybeans and wheat and secure 17,000 contracts of corn.

 

Expectations for the heavy fund selling and high volatility are prompting some traders to take a breather from the markets, a CBOT floor broker said.

 

The markets are also looking ahead to the release of the U.S. Department of Agriculture's supply and demand report on Jan. 11, traders said. The USDA will issue new estimates for carryout, quarterly stocks and winter wheat seedings.

 

CBOT wheat bulls' next upside price objective is to push and close the March contract above strong technical resistance at the September 2007 high of US$9.66 1/2, a technical analyst said. The next downside price objective for the bears is pushing prices below solid support at US$9.15, which would fill on the downside last week's upside price gap on the daily bar chart, he said.

 

First resistance is seen at Friday's high of US$9.40 and then at last week's high of US$9.45. First support lies at Friday's low of US$9.17 and then at US$9.15.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is pushing and closing March wheat above major psychological resistance at US$10.00, the analyst said. The bears' next downside objective is closing prices below solid technical support at US$9.20, he said.

 

First resistance is seen at Friday's high of US$9.55 and then at last week's high of US$9.66. First support is seen at Friday's low of US$9.35 1/2 and then at US$9.28.

 

In China, wheat prices were mostly stable in the week to Monday, as the central government released more wheat stocks in a sale last week. Purchase prices of average quality wheat in Liaocheng in Shandong province, a major wheat producing region, were around RMB1,620-RMB1,670 a metric tonne, stable from the week before the new year holiday.

 

Looking at the weather, moderate to heavy precipitation is expected in the U.S. eastern Midwest and Delta on Tuesday, DTN Meteorlogix said. However, there is no significant cold weather forecast for the next 10 days.

 

In the U.S. central and southern Plains, light precipitation of up to 1/4 inch is seen on Tuesday, but there are no significant precipitation events indicated during the next 10 days, Meteorlogix said. There is also no significant cold weather expected.

 

In Iraq, meanwhile, there are some concerns about drought hurting winter wheat yields. Winter rains, which usually begin drenching the country from October, have yet to arrive and seeds which were planted in the autumn have started rotting or have been eaten by birds, Iraq's agriculture minister said in a media report.

 

Iraq's trade minister last week said in a separate report that the country would import 4.5 million tonnes of wheat in 2008, up from 2.5 million tonnes delivered in 2007.